Oil slumps back below $50 a barrel as recovery hopes fade
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Today’s global market rout has at least one silver lining for consumers: Crude oil’s recent surge above $50 a barrel has, well, run out of gas.
Near-term crude futures in New York slid $3.97 to $48.41 a barrel, the first close below $50 since March 18.
The Obama administration’s decision to effectively take control of the restructurings of General Motors and Chrysler has drained away optimism about the economy that had been bubbling up in recent weeks.
The news ‘was a rather pointed reminder that the economy and oil demand are nowhere near a recovery,’ Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Mass., told Bloomberg News. ‘There was a lot of excitement last week because of rising stock prices, which pushed oil prices too high.’
Oil and other commodities also are taking a hit today from a rebound in the dollar, as deep declines in stock markets worldwide fuel another flight to safety. Commodities compete with the greenback for investors’ attention.
The DXY index of the dollar’s value against other major currencies had tumbled nearly 6% from March 5 to Wednesday as some traders and investors moved into riskier markets -- including commodities -- encouraged by the turnaround on Wall Street.
Crude had rallied to $54.34 a barrel on Thursday, the highest closing price since late November.
But that flew in the face of mounting supplies. As Bloomberg notes:
U.S. crude oil stockpiles surged 3.3 million barrels to 356.6 million barrels in the week ended March 20, the highest since July 1993 and 13% more than average for this time of year, according to an Energy Department report on March 25. Supplies probably rose 3 million barrels last week, according to the median of eight responses in a Bloomberg News survey. Global demand remains slack and oil is unlikely to reach $60 a barrel this year, Qatar’s oil minister, Abdullah Bin Hamad Al-Attiyah, said. Recent oil-price gains were driven by the [weak] dollar, not improved supply and demand, Al-Attiyah said in an interview in Kuwait on Sunday. ‘The international economy is still very weak,’ he said. ‘The crisis has not reached the bottom so we have to be very careful.’
-- Tom Petruno